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Investors scoop up the yen and Swiss franc

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Aussie steadies after hitting five-year low

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Markets leaning toward Fed cut in May

(Updates with midday European trading)

By Rae Wee and Yadarisa Shabong

SINGAPORE, April 7 (Reuters) - Investors poured into

safe havens such as the dollar, yen and Swiss franc on Monday as

the market rout from U.S. President Donald Trump's sweeping

tariffs deepened and fears of a global recession grew.

Global markets were sent into a tailspin on Monday as Asian

stocks and Wall Street futures plunged and investors wagered

that the mounting risk of a deep economic downturn could lead to

a cut in U.S. interest rates as early as May.

The risk-sensitive Australian and New Zealand dollars, as

well as the Swedish and Norwegian crowns, all dropped against

the dollar.

But the dollar in turn fell against safe-haven currencies,

down 0.41% against the yen to 146.255, after tumbling

more than 1.4% earlier in the session, as it extended its 2%

slide against the Japanese currency from last week.

"The big theme has been selling USD/JPY because it's a good

U.S. recession proxy and it's a good U.S. yields proxy and U.S.

yields tanked," said Brent Donnelly, president of market maker

and analytics firm Spectra Markets.

The dollar also hit its lowest in six months on the Swiss

franc and was last down 0.7% at 0.8545.

Both the yen and the franc have emerged as significant

winners in the aftermath of Trump's latest tariff salvo as

investors dump riskier assets and flock to safe havens in a move

that has also seen gold and government bonds catch a bid.

The euro, which gained as much as 0.7% to $1.1050

earlier in the session, struggled for direction in European

afternoon trading. It was largely flat at $1.096375.

"The euro has certainly performed really quite well over the

last couple of days since we've heard about the tariffs," said

Jane Foley, head of FX strategy at Rabobank.

"Maybe that's related to the euro zone current account

position, or maybe it's just related to investors still moving

out of U.S. assets and still not quite sure where they should be

moving their money to."

While the dollar is also typically known to be a safe haven

asset, that status seems to be eroding as uncertainty over

tariffs and concern over their impact on U.S. growth intensify.

However, many market analysts expect traders to return to

the dollar as global uncertainties grow.

European Union

countries will seek to present a united front in the coming

days against Trump's tariffs, likely approving a first set of

targeted countermeasures on up to $28 billion of U.S. imports

ranging from dental floss to diamonds.

Sterling hit a one-month low at $1.28125 and was

last down 0.7% against the greenback.

Meanwhile, the Aussie, often used as a proxy for

risk appetite, tumbled to a five-year low earlier in the

session, but was last flat at $0.60460.

The New Zealand dollar eased 0.14% to $0.5588,

having slid more than 1% earlier in the session.

Trump's tariff announcements wiped out nearly $6 trillion in

value from U.S. stocks last week. When asked about the impact,

Trump said on Sunday that sometimes "medicine" was needed to fix

things, adding that he was not intentionally engineering a

market selloff.

TRADERS HOPE FOR RAPID US RATE CUTS

More than 50 nations have approached the White House to

begin trade talks. China, which has struck back with a slew of

countermeasures including extra levies of 34% on all U.S. goods,

said on Saturday "the market has spoken".

Traders have ramped up bets of more Federal Reserve rate

cuts this year on the view policymakers would have to ease more

aggressively to shore up growth in the world's largest economy.

Markets swung to imply an approximately 55% chance of a Fed

cut in May, and futures now point to more than 100 basis points

worth of rate cuts by December this year. Investors

were previously expecting the Fed to keep rates on hold next

month.

Fed Chair Jerome Powell cautioned on Friday it was still too

soon to know what the right response from the central bank ought

to be.